Ketua Pengarah Hasil Dalam Negeri v Tenaga Nasional Berhad

Appellant(s): Ketua Pengarah Hasil Dalam Negeri

Respondent(s): Tenaga Nasional Berhad

• YAA Tan Sri Datuk Amar Abang Iskandar bin Abang Hashim
• YA Tan Sri Datuk Nallini Pathmanathan
• YA Dato' Zabariah Binti Mohd Yusof
• YA Dato Rhodzariah binti Bujang
• YA Dato' Abu Bakar Bin Jais

• The respondent, the sole electricity provider in Peninsular Malaysia, was issued an additional tax assessment of RM1.8 billion by the appellant (tax authority) after its claim for Reinvestment Allowance (RA) under Schedule 7A of the Income Tax Act 1967 (ITA 1967) for the Year of Assessment (YA) 2018 was rejected.
• The appellant contended that the respondent's principal activity of generating electricity is a utility service, falling under Schedule 7B (Investment Allowance for Service Sector), not manufacturing, and thus Schedule 7A was inapplicable.
• The respondent filed for judicial review, which was allowed by the High Court and unanimously affirmed by the Court of Appeal, both holding that the respondent's business constituted manufacturing.

• Whether the Court of Appeal was correct in determining that the respondent's activities constitute "manufacturing" under Schedule 7A of the ITA 1967.
• Whether the lower Courts erred in relying on *Majlis Perbandaran Seberang Perai v Tenaga Nasional Bhd* and *Ketua Pengarah Hasil Dalam Negeri v Success Electronics & Transformer Manufacturer Sdn Bhd* without due regard to Parliament's intention in enacting Schedule 7B for the utility sector.
• Whether the respondent, as a utility provider, should claim tax incentives under Schedule 7B, which specifically caters to the utility sector, rather than Schedule 7A.

• The Federal Court answered the question of law in the negative, ruling that the Court of Appeal was incorrect, and accordingly allowed the appeal.
• The Court held that Parliament's intention in enacting Schedule 7A was to incentivize manufacturing, while Schedule 7B was specifically introduced to incentivize the service sector, including utilities, indicating that these two Schedules cater to distinct scenarios.
• The Court applied the maxim *lex posterior derogat priori*, reasoning that Schedule 7B, being a later and more specific provision for utilities, should apply over the general Schedule 7A, and noted that ambiguities in tax relief provisions are construed in favour of the Revenue.
• The Court also found that allowing the RA claim for items already granted capital allowance would amount to prohibited double-dipping, and that the respondent's claim, submitted for YA 2018, must be considered under the legal provisions applicable at that time.